Merger prompts Chinese law firms to examine overseas strategies

It is unclear whether the merger between Dacheng and Dentons will be a template for the future development of the legal industry. But it has already prompted Chinese law firms to reflect on their overseas strategies and begin exploring similar tie-up opportunities.

Zhun Lun Law Firm, the sixth-largest Chinese law firm in terms of mergers and acquisitions business, said it is also mulling plans to team up with an international firm or to join an international network.

Wu Peng, managing partner of Zhun Lun, said the firm's overseas presence has been limited and it is reorienting its global strategy in a cautious manner as cross-border business has already accounted for half of its business.

The merger between Chinese law firm King & Wood and Australian firm Mallesons Stephen Jacques in 2012 was regarded a groundbreaking case in the legal profession as it was the first Chinese law firm to combine with a major Western one.

The China (Shanghai) Free Trade Zone is likely to further open the nation's legal service market as Chinese policymakers are considering to use the pilot area as a test ground for joint operations by Chinese and foreign firms, experts said.

Though detailed regulations are yet to be clarified, many large foreign firms including Baker & Mckenzie are following the development within the free trade zone closely, hoping to gain first-mover advantages once restrictions are relaxed.

At present, foreign law firms can only set up representative offices in China and they are prohibited from practicing Chinese law for local clients.

Some experts doubted whether the alliance among major law firms would be beneficial for their clients as the dominance by a few large firms will reduce competition which could potentially result in higher legal fees for companies.

The difference between Chinese and international firms in terms of financial strength, legal expertise and service quality would also be a major obstacle for the combination of law firms, analysts said.

The legal profession outside China has undergone a wave of consolidation. The number of law firm mergers and acquisitions in international markets more than doubled from 39 in 2010 to 82 in 2014, The Washington Post reported.